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Mar 21, 2014

German firms fret about lowering of pension age

As of July, people can retire at 63
By Michelle Martin
    
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BERLIN (Reuters) — Marie-Christine Ostermann is desperate to hang on to her older employees — there is already a shortage of skilled labour in Germanyand a new draft law that lowers the pension age for some workers is adding to her problems.

Six of the 150 staff at her family-run food and kitchen supplies wholesaler Rullko say they would like to retire at 63, once the new law takes effect this summer. That is four years earlier than planned — a big worry for Ostermann.

She says skilled workers are so scarce, it recently took her three years to replace one purchasing manager. There are fewer applicants for the firm's trainee scheme every year and the skills of those who do apply are deteriorating.

"It's very hard to find well-qualified people to fill vacancies nowadays so it would create huge problems for me if a lot of the older employees take early retirement," Ostermann told Reuters from Rullko's base in Hamm, western Germany.

Chancellor Angela Merkel's new right-left coalition has made reforming the pension system one of its flagship projects. From the start of July, it plans to allow some people to retire on a full pension at 63, provided they have worked for 45 years without claiming jobless benefits for more than a short time.

Economists say it's the last thing Europe's largest economy needs. Germany's population is ageing and more than one in three firms is complaining of a lack of skilled labour.

The measure, a pet project for the centre-left Social Democrats (SPD) who share power with Merkel's conservatives and are committed to social justice goals, will initially cost 1.9 billion euros ($2.62 billion) a year, rising to 3.1 billion euros in 2030.

Germans work longer than Greeks, Spaniards and French people, says Eurostat, retiring after about 37.5 years in employment. The EU average is 35 years. But the reform is raising eyebrows given that Germany has demanded economic sacrifices from its struggling euro zone peers.

The German government expects about 200,000 people to qualify under the new legislation in the year it is introduced and estimates a quarter of them would retire later than 63 were it not for the planned legislation.

Economists, unions and business groups say the reform will make it hard to finance Germany's pension system in future.

"Pension contributions and taxes will inevitably rise at the expense of ever fewer contributors, so young people will have to pay for these presents knowing full well that they will never get as much themselves," said Rainer Dulger, head of metal and electrical employers' association Gesamtmetall.

Aging population

Germany has the EU's lowest birthrate and a rising life expectancy. Around half of 60- to 64-year-olds were working in 2012, compared with one in four 10 years earlier.

Hans Peter Wollseifer, head of Germany's ZDH Confederation of Skilled Crafts, said half the firms in his branch regard employing older workers as key way of getting skilled labour.

Lutz Goebel, who runs Henkelhausen, a 250-strong firm that specializes in installing and maintaining diesel and gas-based power sources, says more than half his employees could retire at 63 yet these are the workers he values most.

"Politicians are sending well-qualified workers with a lot of experience into early retirement and leaving a gap which is very difficult to fill," he said, accusing the government of putting Germany's competitiveness at risk.

Michael Huether, head of the Cologne Institute for Economic Research, said firms had so far countered the skilled labour shortage by keeping older employees on for longer and that lowering the pension age sent out "completely the wrong signal".

"A longer working life and a higher retirement age are the best tools we have to counter demographic change and a skilled labour shortage," he said.

Rolling back reforms

In 2007 a previous Merkel-led grand coalition agreed to gradually raise the official retirement age by two years to 67 between 2012 and 2029. Though the new draft law restates a broad commitment to this, many see reducing the pension age for some workers as a step backwards.

The SPD, keen to win back support from the working class after a poor showing in September's election, insisted on the lower pension age before agreeing to join a Merkel government.

"The pension at 63 adjusts the system to the realities of peoples' lives," said SPD Labour Minister Andrea Nahles.

"People who start working at age 16 or 18 will, at some point, reach the limit of their physical ability. People know that and they feel that we are remedying an injustice here."

But Wolfgang Steiger, a senior Markel conservative representing business interests, told Nahles this month the move would be "a catastrophe for Germany as a business location."

Back in Hamm, Ostermann is trying to persuade older administrative employees to stay on until they are 67 and is offering alternatives to those with physically demanding jobs.

"Workers who do tough manual work in our cash and carry or logistics divisions can, for example, switch to departments where they check customer orders so they no longer have to do heavy lifting," she said.

Later still, they can fill customers' cars at Rullko's petrol station, where some of the employees are over 70.

    
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